Recession? What recession?
The US economy bucked nonstop doom-and-gloom by economists — including some at Wall Street’s biggest banks — and reported stronger-than-expected growth in the second quarter, marked by a surge in hiring and wages.
Gross domestic product – the value of all goods and services produced across the US economy – jumped by a seasonally and inflation adjusted 3% in the second quarter, the Commerce Department said Wednesday.
That rebounded from a 0.5% decline in the first quarter and beat estimates of just 2.3% growth. A recession is usually defined by the GDP slipping in two consecutive quarters.
Meanwhile, private employers added 104,000 jobs last month, according to the ADP National Employment Report released Wednesday.
That reversed a 23,000 drop in June and exceeded the forecast for an increase of 64,000.
Annual wages spiked 4.4% — well above the rate of inflation, which has remained below 3% despite harping that President Trump’s tariffs would jack up prices.
“Our hiring and pay data are broadly indicative of a healthy economy,” Nela Richardson, ADP’s chief economist, said.
“Employers have grown more optimistic that consumers, the backbone of the economy, will remain resilient.”
That resilience upended dire predictions for a recession by many left-leaning politicians and even big banks like Goldman Sachs and JPMorgan. The Wall Street giants had hiked the risk level for a recession to 65% and 60%, respectively, in April following Trump’s “Liberation Day” tariff rollout.
One JPMorgan dashboard of market-based recession indicators put the likelihood at “nearly 80%, with the Russell 2000 pricing in a 79% chance of an economic downturn,” Bloomberg reported on April 8.
Both banks have since lowered the odds, to 40% by Jamie Dimon-led JPMorgan and 30% by Goldman-led David Solomon.
The GDP surged without any help from the government as federal outlays declined 3.7%, coming off a steep 4.6% drop in the first quarter.
Trump cheered the strong GDP data in a post on Truth Social before once again calling on the Federal Reserve to slash interest rates: “No Inflation! Let people buy, and refinance, their home!”
Fed policymakers, however, resisted pressure from the White House, leaving rates unchanged after their two-day meeting ended Wednesday.
When combined with data from the first quarter, Wednesday’s GDP report showed an economy in the first half of the year that is growing – albeit slowly at an annual rate of 1.2%, below last year’s 2.5%.
Demand from businesses and consumers, also called final sales to private domestic purchasers, rose at a 1.2% rate in the second quarter.
This crucial figure does imply some weakness buried in the economic report, as it’s down from 1.9% in the first quarter and at its weakest pace since 2022.
Consumer spending picked up in the second quarter at a 1.4% pace, according to the Commerce Department.
“The economy remains resilient and growing, and that’s the most important takeaway from this report,” Jamie Cox, managing partner at Harris Financial Group, wrote in a note.
In the private payrolls report, leisure and hospitality led the growth with 46,000 new jobs.
Financial activities; trade, transportation and utilities; and construction also added significant hires – with increases of 28,000, 18,000 and 15,000, respectively.
Education and health services lost 38,000 in the same period.
Consumer confidence largely rebounded as economic anxiety around the tariffs eased, but the share of consumers viewing jobs as “hard” to get jumped to the highest level in more than four years, according to a survey from the Conference Board.
Economists are now awaiting the nonfarm payrolls report from the Bureau of Labor Statistics, which will be released Friday.
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